The physical construction expenses — site, materials, labor.
Hard costs in construction are the physical expenses of building — site work, foundation, framing, mechanical/electrical/plumbing, finishes, exterior, landscaping. Hard costs are typically estimated per square foot and form the largest single category in any construction budget, usually 65–80% of total project cost.
Hard cost per square foot is the central construction cost metric. Ranges vary by market and project type: SFR builder-grade construction runs $145–$185/sqft in most markets. SFR custom homes run $250–$450/sqft. Multifamily runs $190–$280/sqft on garden-style; $225–$325/sqft on mid-rise; $350–$550/sqft on high-rise. Industrial runs $55–$120/sqft for warehouse, $80–$150/sqft for flex.
Hard costs break down into categories. Site work (excavation, grading, utilities, paving) — 8–15% of hard costs. Foundation — 5–10%. Framing (rough framing, sheathing, roof) — 15–22%. MEP (mechanical, electrical, plumbing) — 20–30%. Finishes (drywall, paint, flooring, cabinets, fixtures) — 25–35%. Exterior (siding, roofing, windows) — 10–15%.
Hard costs are typically structured into a fixed-price GC contract for SFR construction or a guaranteed maximum price (GMP) contract for larger projects. Fixed-price puts cost overrun risk on the GC; GMP shares it with the developer. Both structures require detailed scope and specifications upfront — vague contracts produce vague costs and inevitable change orders.
Hard cost contingencies are essential. Most lenders require 5–10% hard cost contingency built into the project budget — money set aside for unforeseen conditions, scope changes, and minor overruns. Without contingency, even modest surprises (unexpected site conditions, material price shifts, sub-contractor mistakes) create project funding gaps that have to be plugged with borrower cash.
| Building size | 2,200 sqft above-grade |
| Quality tier | Builder-grade |
| Per-sqft cost | $165 |
| Total hard costs | $363,000 |
| Breakdown: | |
| Site work + foundation | $54,450 (15%) |
| Framing + roof | $72,600 (20%) |
| MEP | $94,380 (26%) |
| Finishes | $108,900 (30%) |
| Exterior + landscaping | $32,670 (9%) |
| Contingency (8%) | $29,040 |
| Hard cost budget with contingency | $392,040 |
Physical building expenses — site work, foundation, framing, MEP, finishes, exterior, landscaping. The actual cost of building. Usually 65–80% of total project cost.
A standard construction cost metric. SFR builder-grade: $145–$185/sqft. SFR custom: $250–$450/sqft. Multifamily garden: $190–$280/sqft. Varies sharply by market and quality.
Finishes (drywall, paint, flooring, cabinets, fixtures) typically run 25–35% of hard costs. MEP (mechanical, electrical, plumbing) is next at 20–30%. Together they're often 50%+ of the build.
For unforeseen conditions, scope changes, and minor overruns. Even well-planned projects encounter surprises — soil conditions, material price changes, sub-contractor issues. 5–10% contingency is standard.
Fixed-price puts the cost overrun risk on the GC — they're committed to the price regardless. GMP (guaranteed maximum price) caps the price but shares overrun risk between GC and developer. Fixed-price is simpler; GMP is more common on larger projects.
Matrix structures construction loans on detailed GC contracts and budgets — draw schedules align with actual build milestones.
